April 20, 2016 / 11:07 AM / in a year

Weak Europe demand, strong dollar take fizz out of Coke's sales

Cans of Coca-Cola sit on a shelf in a store in London, Britain March 16, 2016. REUTERS/Stefan Wermuth

(Reuters) - Coca-Cola Co’s sales fell for the fourth straight quarter as demand weakened for its fizzy drinks in Europe and a strong dollar ate into revenue from other markets outside the United States, including Latin America.

Shares of the world’s largest beverage maker, which maintained its revenue and earnings growth forecasts for 2016, fell as much as 5.5 percent to $44.06 on Wednesday.

Coke and smaller rival PepsiCo Inc have been hurt as consumers increasingly turn health-conscious, cutting back on fizzy drinks and opting for teas, fruit juices and smoothies.

The rise in the dollar has also hit the companies, which have a sizeable presence in markets outside the United States, including China and Brazil.

The average value of the dollar rose 2.6 percent in the first quarter from a year earlier.

Coke’s sales in Europe, its third biggest market, declined 1 percent in the quarter ended April 1, while Latin America sales plunged 12.2 percent.

Sales in Asia Pacific, including China, dropped 4 percent, but volumes increased as the company sold more lower-margin products.

In Asia, pricing is expected to be a “little volatile and bumpy” in the coming quarters, Chief Operating Officer James Quincey said on a post-earnings conference call.

He said the impact of the “challenging” macro environment in China on the industry was worse than expected and demand in Brazil had suffered due to macroeconomic headwinds.

Coke is banking on new marketing initiatives, such as the “One Brand” program rolled out on Wednesday, to boost sales.

All cans and bottles of its Coca-Cola branded sodas will have a similar appearance, prominently featuring the red color associated with regular Coke, but sporting a band of the color that distinguishes Diet Coke, Coke Zero and Coke Life.

The company has also introduced smaller packs, which typically bring higher margins.

SALES DROP

Coke’s net operating revenue fell 4 percent to $10.28 billion. However, total organic revenue, which excludes the impact of currency movements, acquisitions and divestitures, rose 2 percent.

The net income attributable to shareholders fell 4.5 percent to $1.48 billion, or 34 cents per share.

Excluding items, Coke earned 45 cents per share, beating the average analyst estimate by a cent, according to Thomson Reuters I/B/E/S.

Coke maintained its 2016 forecast of 4-5 percent growth in organic revenue and 4-6 percent growth in earnings per share on a constant-currency basis.

(This story corrects paragraph 7 to say volumes in Asia Pacific increased as the company sold more lower-margin products, and not after the company sharply cut prices)

Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Kirti Pandey

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